Inflation to Stay in the Short-Term

The Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) have warned that inflation is likely to remain elevated in the short term. This is despite a slight easing of the Consumer Price Index to 5.5% in Dec 2011 (from 5.7% in Nov 2011). Inflation for the whole of 2011 was 5.2%.

The MAS has further reported the the core inflation index, which excludes private road transport and accommodation was much lower. The overall core inflation for 2011 was 2.2%.

Employers planning for their annual wage adjustments should take these indicators into consideration. Any increment less than the inflation rate will mean a reduction of real wages. However, this needs to be balanced with the overall economic outlook for 2012. Increment rates of between 1.5% and 2.5% are fairly common, although some employers have already introduced wage freezes in preparation for what is expected to be a rough year ahead.